You’ve probably had that thought cross your mind before. You get a letter in the mail from your credit card service provider and they are more than happy to inform you that “Your credit limit has just been raised by another 1,000 bucks! Congratulations and thank you for using our card.” Now that your limit is that much higher, you start thinking about what exactly could you use your ridiculously high credit limit on. One option that is thought of a lot but rarely explored: buying a card using your credit card.
Purchasing a car with your credit card actually is not totally unheard of. There are differing situations and exceptions where using a credit card is actually permissible, but its rarely simple process or an easy sell to buy your desired car with the swipe of a plastic rectangle.
Here is what you need to know if you are looking to buy a car with a credit card.
You can, but probably shouldn’t.
The first thing that needs to be said about trying to put your vehicle purchase on the card is that you shouldn’t make the buy if you genuinely cannot afford the asking price outright. It’s very tempting to want to use that mile high credit limit for either a down payment or a monthly payment set up, but if you don’t have the money for it currently available, you are actually doing yourself a bigger disservice by buying the car on the credit card because if you make a mistake, your credit score could very well begin to plummet.
There is a large and unignorable risk if things go south, but if done correctly, it actually could provide you with the opportunity to boost your credit score with on time payments and rewards points, and not to mention the car you just bought.
Just be sure to really think the situation through before you make a move.
Don’t ignore the pre-established deals.
Many times the deal you can get through direct financing from the dealer will be better than the deal you think you might be getting by buying the car using a credit card. Yes, it may appear that you will have more legroom to make those monthly payments without having to pay them in full every month, but the interest fees usually attached to the deals made directly through the dealer is lower than the interest fee attached to a credit card. In the long run, you could potentially be paying more for the car if you put it all on the plastic. If you are looking for a deal, then stick to the financing options made available by the car dealership, you’ll save a considerable amount more.
Many dealers don’t offer credit card purchases.
If you attempt to buy the car you see on the lot and pull out the credit card come time to sign, you will more than likely be shut down pretty quick. It’s no secret that car dealers and vendors alike hate credit card services. While they may be super convenient for us as the consumer, for the people on the other side of the deal, not very much so.
When businesses agree to accept credit cards, they must pay what is called a “transaction fee”, and that occurs in the shape of a percentage (sometimes a single percent) being taken out every time you swipe. Sometimes the fee is payed by us, the customer, and when that happens we become quickly annoyed –even if it is just 10 cents. Imagine that 1% transaction fee on a purchase of $50,000 (that’s 500 bucks for those keeping score at home). That money comes right out of the dealer’s profits, so don’t expect to see a smile spread across the dealer’s face anytime a credit card shows up.
In a car dealing situation, the transaction fee falls to them, so that fee will be coming straight out of their pockets. Due to this, they will more than likely decline your offer pretty quick if you reach for the credit card come time to settle up on payment.
Exceptions to the dealers saying “No”.
Before you write us off as trying to tell you to shred all of your credit cards because you’re super high credit limit is pretty much worthless because you can’t even buy a car with it, you should know that you still can. Think high and low when it comes to buying a car using a credit card: you can by a really inexpensive one or a very pricey luxury one.
Depending on the car you have your eye on at a used car dealer (privately owned), you just might be able to drive home on a purchase made through the plastic after all. If you come across a $5000 car, and it is well within your credit limit and the dealer happens to be a nice guy, you just might be able to call that vehicle your own as soon as he dusts off his credit card swiper.
When it comes to high, you might be surprised by the fact that you can purchase a high end sports card using credit cards. This isn’t always true, so be ready to be told that the answer is no to your question of “do you take MasterCard?” by the floor man. They just maybe-might-possibly say yes to your question because the amount of profit they will make on the purchase is so much more astronomically higher than the transaction fee.
So if your credit limit is high enough to purchase a brand new Lambo or Porsche, kudos to you for figuring out how to get it that high, and don’t be afraid to ask the dealer if it’s an option (although we think you should spend your money elsewhere).
Could lead to a lot of rewards if you can genuinely afford it.
The perk of being able to buy a car on the credit card is that if you do it right, you can rally up your credit score with very little effort, as well as scoop up those rewards points for miles that you otherwise would very slowly accumulate.
Buying a car with a credit card isn’t necessarily the safest option to be considered, but if it is done correctly, it can be a pretty huge help to your credit standing. Just be sure you are not walking yourself into a situation that is over your head and that you really can afford the car before you pull out the plastic.